Berkshire Hathaway released quite a bit of big news on Wednesday evening, announcing the resignation of David Sokol. He is the chairman of [Berkshire subsidiary] MidAmerican [Energy] and also considered a top lieutenant to Warren Buffett.

Here with me to discuss the details of this announcement and what it may mean for Berkshire Hathaway is Morningstar's Paul Larson. He is an equity strategist and editor of the Morningstar StockInvestor newsletter. Thanks for joining me, Paul.

Paul Larson: Thanks for having me.

Stipp: So, you are a Berkshire shareholder, so you are obviously watching this situation very closely. Can you give us a quick sense of who Sokol is and what the terms of the resignation were--what was behind it?

Larson: Sokol was indeed the chairman of MidAmerican Energy and also headed some other operations within Berkshire, most notably NetJets, and what happened is Sokol gave his resignation today very unexpectedly and then there also came to light some interesting news regarding some personal stock purchases that he made that were related to the Lubrizol acquisition that Berkshire recently announced.

Stipp: So Sokol pretty much took the lead on the Lubrizol acquisition, in pitching the acquisition to Buffett. What were the details of the share purchases, because obviously this is a very sticky situation normally when you see this sort of trading happening ahead of an acquisition?

Larson: Well, Sokol actually bought the shares ahead of pitching the idea to Buffett, and then after he had pitched the idea to Buffett, but before he knew what Buffett and anyone else at Berkshire was going to do with the idea. Buffett in his letter--it's very interesting the press release from Berkshire was actually a letter written by Warren Buffett, which is a very unusual thing--he lays out the timeline of what exactly happened when, and I would encourage people to actually read that letter to get the details.

Stipp: So, is this something that, by your read of it, looks like it could be potentially illegal? Or is it just something that looks bad?

Larson: I would say this is probably legal but most certainly looks very, very bad. And I would say it looks like maybe someone was sniffing around information and was about to write a story and maybe Berkshire and Buffett wanted to get ahead of the story, so to speak, and you know that's what it smells like to me at least.

Stipp: It feels like it, even though Buffett did say in that press release that the resignation didn't have anything to do with the share purchases. He also asserted that they were not unlawful. So, anyway, interesting story connected with that--interesting that Buffett went into such detail about that situation.

There are a couple of other interesting aspects to this story, however. As we mentioned before, Sokol was one of the top heir apparents to potentially succeed Warren Buffett at Berkshire Hathaway. That's not going to happen now. Where does that leave us with the succession issue, Paul?

Larson: Jason, your guess is as good as mine. I think the situation is as clear as mud. We had said many times before, and many other commentators had said, that Sokol was a leading candidate. Clearly we were dead wrong in that. It was revealed that Sokol had attempted to resign at points in the past, and so our bets placed on him earlier were wrong.

I wish I could give you two or three more names of top people that are really at pretty good odds of becoming the next operating CEO at Berkshire, but frankly I don't have them, and I don't think anyone else does other than perhaps those inside the Berkshire organization.

Stipp: And Sokol isn't the only high-profile person that's left Berkshire in the recent past, right?

Larson: Over the last year, we also lost Lou Simpson, and he was obviously very integral to the investment side of Berkshire Hathaway--one of the top dozen people--and obviously Sokol was also one of the top dozen people. So, that's two major losses to the Berkshire organization in the last year, which is not good news, unfortunately.

Stipp: Last question for you, Paul. As a shareholder of Berkshire Hathaway, do you feel like there is a big overhang because of the succession issue, and second follow-up question to that: Is that overhang merited?

Larson: I think there is an overhang, and I think it is merited. I think that it would be good to have a better idea of who is going to actually be running these operations, because I think it's going to take a very unique individual, because you can't just have a good operational CEO come in and run the organization because you are not really operating one business, you're talking about dozens of different businesses. You need someone who has a skill set of being a manager of other investment managers and other operators, which is something that not very many people have.

Stipp: Of course, Buffett's investment acumen is hard to match.

Larson: Yep. No doubt about that.

Stipp: All right Paul. Thanks for the context. We're obviously watching this story very closely. Thanks for your insights today.